MNI: Powell: Fed Rate Cuts Can Keep Labor Market Strong
Federal Reserve chair Jerome Powell says policy is moving toward a more neutral stance.
The Federal Reserve is increasingly convinced it can achieve a soft landing for the economy by lowering interest rates to keep the labor market strong, Fed Chair Jerome Powell said Monday.
"Our decision to reduce our policy rate by 50 basis points reflects our growing confidence that, with an appropriate recalibration of our policy stance, strength in the labor market can be maintained in a context of moderate economic growth and inflation moving sustainably down to 2%," he said in remarks prepared for a National Association of Business Economics meeting in Nashville, Tenn.
"If the economy evolves broadly as expected, policy will move over time toward a more neutral stance. But we are not on any preset course. The risks are two-sided, and we will continue to make our decisions meeting by meeting."
The Fed has made a great deal of process on its price stability and maximum employment goals, Powell said.
Headline and core inflation are now at 2.2% and 2.7%, respectively, and "broader economic conditions also set the table for further disinflation," he said. (See MNI POLICY: Fed Increasingly Confident It Defeated Inflation)
CLEARLY COOLING
The labor market is also solid with low rates of layoffs and more job openings than the unemployed, he noted, but conditions have "clearly cooled" over the past year.
"We do not believe that we need to see further cooling in labor market conditions to achieve 2% inflation," Powell said. (See: MNI INTERVIEW: Fed Cuts Expected To Bolster Jobs - UMich)
The FOMC sees the risks to achieving its employment and inflation goals as "roughly in balance," he said.
At the committee's September meeting, the vast majority of the 19-member FOMC penciled in one to two more 25 bp rate cuts this year, with the median official projecting a fed funds rate target by the end of 2025 at 3.4%, compared to just below 5% now.